'As catastrophic as the financial crisis': Here's what Mark Carney warned politicians will happen to the UK economy after a no deal Brexit

Bank of England Governor Mark Carney privately warned
the government of the potentially dire economic consequences of
a no deal Brexit.

Carney reportedly told Prime Minister Theresa May's
cabinet on Thursday that a no deal Brexit outcome "could be as
catastrophic as the financial crisis."

Among the consequences of no deal would be a 35% house
price crash, and the UK's rate of unemployment more than
doubling.

LONDON - Bank of England Governor Mark Carney has privately
warned the UK government that a "no deal" Brexit could bring
about a housing market crash and a surge in the UK's unemployment
rate, according to several reports.

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According to The Guardian newspaper, Carney told UK Prime
Minister Theresa May's cabinet on Thursday that a "no deal"
Brexit outcome "could be as catastrophic as the financial crisis"
for the economy. Carney attended a special cabinet meeting
designed to discuss contingencies for no deal, and was reportedly
in the room for around 30 minutes.

Britain is due to leave the European Union in March 2019 but has
made little progress in agreeing a deal on its future trading
relationship with the EU after exit. This has made a so-called
"no deal" scenario, where Britain crashes out of the EU and falls
back on WTO trading rules, more and more likely.

Carney's forecast that a "no deal" Brexit would cause the pound
to dive, much like it did the day after Britain voted to leave
the EU, and would help cause a steep rise in inflation. That rise
in inflation would be compounded by rising trade tariffs as a
result of Britain failing to secure a trade deal.

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Surging inflation would mean that the Bank of England would
struggle to use one of its main tools for assisting the economy -
lowering interest rates.

When inflation rises, rates tend to increase as well, as a means
of subduing that inflation. The Bank of England would be forced
into rate hikes, Carney reportedly said, which in turn would make
it more difficult for people to borrow, and service their debts.

Carney also said that "no deal" would cause a crash in UK house
prices by as much as 35%,
according to a report from The Times. Bank of England
economic modelling showed that over three years prices across the
UK would likely fall between 25% and 35%, Carney reportedly told
the cabinet. A house price crash would likely be linked to rising
rates making it more difficult for borrowers.

A "no deal" scenario could also see the UK's unemployment rate
rise to double-figure percentages, Carney said. Currently, the
UK's rate of unemployment is just 4%.

"The worse-than-no-deal scenario was very concerning, but it
prompted a lot of broad agreement on the steps that we would need
to take next to support the British economy in the event of
leaving the EU on poor terms," a cabinet source told the
Guardian.

The Bank of England declined to comment when contacted by
Business Insider.

"Instead of believing it's different this time, or hoping that
everything will be all right on the night, the Bank of England
now thinks about what could go wrong and then prepares our banks
so they can keep doing their jobs in case it does," he wrote
during a discussion of the Bank of England's preparations for
Brexit.